Saturday, 8 April 2017

Price Puzzle or Cartel?

same item big price difference.jpg

I am surprise to learn about the big difference in price for a simple medical skin cream as shown above.  It is by chance I find out the cheapest price (so far) at SGH pharmacy. If I am not visiting a friend at SGH, I will never find out the price difference.  

We know government hospitals are not subsidizing medicines, not to mention hospital pharmacies that cater for public.

So even at $3.82 per tube (including GST), SGH (Singapore General Hospital) pharmacy is still making profit!  Does this mean pharmacies outside SGH are having unreasonable huge profits?   

Is this a ‘one-off’ special case or a common practice?

I regular buy this skin cream at a TCM (Traditional Chinese Medicine) shop. Last year, it was $5 per tube. However, recently, the price changes a lot from $5 to $8. It forces me to check the price at Guardian and NTUC pharmacy. They offer even higher price than the TCM shop. I think I may have to get cheaper and similar skin cream from Johor Bahru until I find out the cheaper price at SGH.

I wonder why the price increase so much outside SGH pharmacy. From $5 to $8, this is a 60% increase. We know electricity and water prices are going to increase, so hawkers and coffee shops also increase their prices. But I don’t think they increase their coffee or food price by 60%.

[Lack of Information]

We really don’t have perfect information and the market is also not in perfect competition.

We need to compare price. Even I shop at TCM shop, I can still manage to save 90 cents to $1 per tube. Actually, I bought 6 tubes at SGH pharmacy, you can imagine my savings. ($48-$22.90 = $25.10)    

Comparing TCM shop, Guardian and NTUC pharmacy, TCM shops are less likely to enjoy ‘economy of scale’ in their purchase. But how can they offer cheaper than the big boys?  Is this an advantage or disadvantage of small and medium size enterprise?

How can we protect the interest of consumers under an imperfect information environment? Oh! Some one may suggest we have CASE (The Consumers Association of Singapore)?

[Selective Reporting]

Under the imperfect information environment, we can also do selective reporting. The government can claim government hospitals do not make profit just look at the skin cream we are charging, so much lower than outside.

This is a ‘feel good’ reporting. Outside the government hospitals, whether you are able to get the same price or higher price, the selective reporting does not concern so much.  The report’s duty is just to project the good image of the government.

When the government announces that water and electricity price is going to increase, or transport fares are going to adjust, they always refer to ‘market price’. In this case, they are referring prices in the market (TCM shops, NTUC or Guardian).      

When they price the HDB (Housing and Development Board) flat and fees for university education, the government also uses the market price. However, when they calculate National Service pay, the government refers it as NS allowance. Allowance, of course, is different from market compensation.

Selective reporting can be bias and for political purpose. In Singapore, we can see this in not only in news reporting but also in radio, broadcasting and social media.  

For the purpose of illustration, the above report can also base on sentence reduction in term of percentage. Here, we can select and rank percentage reduction for all of them. And obviously, we will see the difference - who get more cut and who get less!   

Punishment Reduction in Percentage

After Appeal
% Reduction
Kong Hee
8 years
3 years 6 months
Chew Eng Han
6 years
3 years 4 months
Tan Ye Peng
5 years 6 months
3 years 2 months
Serina wee
5 years
2 years 6 months
John Lam
3 years
1 year 6 months
Sharon Tan
1 year 9 months
7 months

[Is selective reporting Fake News?]

Recently, we talk a lot about fake news and the government is thinking very hard to catch and punish the ‘fake news’ reporters.

This makes one wonder can selective reporting, bias reporting, brainwashing reporting, propaganda reporting also be a kind of fake news?

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